The Financial Industry Regulatory Authority is ordering CFD Investments to pay a $125K fine over what the self-regulatory authority (SRO) found to be the inadequate supervision of its registered representatives when they sold variable annuities(VAs) to customers. FINRA said that between 7/2014 and 7/2016 the broker-dealer did not set up, keep up, or enforce written procedures or a supervisory system designed in a reasonable enough manner that would allow the firm to properly oversee these transactions.
The SRO found that of the 1,574 VA purchase and exchanges made by the firm during the period in question, over 18% of them were L-share contracts, most of which came with long-term riders. However, according to FINRA, many of broker-dealer’s customers that bought these shares wanted a long-term investment horizon and would have benefited more from being sold B-share contracts. Also, unlike L-share contracts, B-share contracts don’t come with 30-50 basis point annual fees.
Inadequate Supervision and Inappropriate Recommendations
It is important that your broker and financial firm make investment recommendations that are not only appropriate for your investment goals and the degree of risk that you can handl, but also they are the choice that should benefit you the most. Inadequate supervision can make it easier for brokers to make the wrong recommendation or cause a customer to pay high fees that they might not have had to otherwise. Inadequate training of brokers can make them ill-prepared and not well-informed enough to make suitable investment recommendations to customers.
Variable Annuity Fraud
At Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm), our variable annuity investor lawyers are here to work with investors that have unnecessarily lost funds due to variable annuity fraud or because of inappropriate VA recommendations that were made to them by a financial representative and/or broker-dealer. Variable annuities are not for every investor, especially those that are unable or unwilling to take on too much risk.
For example, variable annuities tend to:
· Render high surrender fees.
· Can result in stiff tax penalties.
· Charge high commissions.
· Have returns that are influenced by how well or poorly the market is doing.
If you believe your variable annuity investment losses are due to inadequate supervision, inappropriate recommendations, or other reasons that could indicate signs of broker misconduct, negligence, or fraud, contact SSEK Law Firm today and ask for your free, no obligation case consultation.